As the use of virtual currency increases, the IRS has continued to issue guidelines for the tax treatment of virtual currency, along with clarification of what it is considered virtual currency. The IRS has stated “in general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability”. For more information, please see the IRS website.
In addition, if a taxpayer received, sold, sent, exchanged, or otherwise acquired any financial interest in virtual currency during 2019, it must be disclosed on the taxpayer’s 2019 income tax return.
If a taxpayer has any questions or concerns regarding tax implications of virtual currency, they should consult a tax advisor.